FCC grilled on media-ownership vote

Powell offers spirited defense, cites court rulings

WASHINGTON (CBS.MW) - A top federal regulator on Wednesday defended a controversial vote to ease ownership limits on media companies, saying he was forced to take action in the wake of a string of court defeats.

Michael Powell, chairman of the Federal Communications Commission, told a panel of mostly critical U.S. senators that the old regulations could not withstand legal scrutiny. The new rules stood a better chance of being upheld, he said.

"I believe we did our job, and indeed that we did it well," Powell asserted at a hearing sponsored by the Senate Commerce Committee. All five FCC commissioners attended.

After strong denunciations earlier this week, many senators critical of the ruling tempered their remarks. Still, lawmakers in both parties called for the agency to reconsider its new rules and some called for the Congress to override the FCC.

Sen. Barbara Boxer, D-Calif., issued the sharpest reproach, saying the agency acted more like a "lapdog" for big media companies instead of a "watchdog" for the public interest. "I hope to overturn what you did," she said.

The two Democrats on the FCC commission seconded that idea. "We really need your help," said Jonathan Adelstein. "The public interest, if not dead, is mortally wounded."

Powell, for his part, rejected the charge that the agency went too far, calling the changes "modest."

Since the courts show greater deference to lawmakers than to regulatory agencies, he noted, Congress should pass a law if it disagrees with the FCC decision.

Sharp divide

On Monday, the FCC voted 3-2 along party lines to allow broadcasters to acquire a group of television stations whose signals reach 45 percent of the potential national audience, up from the old cap of 35 percent.

The agency also narrowly agreed to drop a 20-year-old ban on cross-ownership, thereby permitting one company to own newspapers, TV channels and radio outlets in the same market.

The FCC was responding to repeated defeats in the U.S. Federal Appeals Court in Washington, D.C. The court ruled that the agency had done little to justify its existing rules and that it appeared to be infringing on the free-speech rights of media companies.

Under a congressional mandate, the agency also has to review its media regulations every two years. The FCC was already six months behind in completing its latest go-around.

Critics claim the ruling could trigger a flood of mergers, allowing a few media titans to gobble up most TV stations, radio outlets and newspapers. If such consolidation ensues, they say, Americans would lose access to a variety of programming and diverse points of view.

"The question now is, whether this Congress will stand up for the public interest," said Sen. Ron Wyden, D-Ore.

Congress to blame?

Powell suggested that the root of the problem stemmed from the landmark 1996 law designed to boost competition in the media and communications industries. The court has consistently viewed the act as requiring the FCC to get rid of rules it no longer deemed necessary and to pursue a deregulatory bent, Powell noted.

Several senators critical of the FCC ruling admitted that the Congress fouled up seven years ago.

"We didn't put 35 percent into the act," said Ted Stevens, R-Alaska. "We should have, and we wouldn't have this problem today."

The FCC chairman also argued that the old rules did not take into account the explosion of new media outlets - TV, cable, Internet, satellite radio - by which people receive information.

Still, others insisted that the old 35 percent cap was just fine and that the FCC should have figured out a way to justify it to the court.

"We have seen this [growth of new media] under present rules," noted Conrad Burns, R-Mont. "My inclination is: why change?"

Powell said he believed the 35 percent cap was indefensible in court. He noted that Viacom, owner of CBS, and News Corp, owner of Fox, both can reach about 40 percent of the U.S. population via special waivers. The FCC could find no proof that the existing situation posed a threat to consumers, he said.

As a result, the FCC had to devise a new standard above 40 percent. The majority settled on 45 percent - rejecting a higher number -- to try to maintain the power of independently owned network affiliates.

Sen. John McCain, R-Ariz., head of the Commerce Committee, expressed sympathy for the agency's point of view. While everyone is against excessive media concentration, he said, "It's difficult to know what the standard should be - 25 percent, 35 percent, 45 percent."

Debate over data

Similarly, Powell said the FCC's media review failed to turn up concrete evidence that the cross-ownership ban protected the public interest.

Indeed, he said one major study showed that TV stations owned by newspapers often provided better local coverage than rival broadcast outlets.

The agency's two Democrats, however, said the FCC had not collected enough data to draw such firm conclusions.

Michael Copps said the agency needed more time and he lamented the refusal by the chairman to delay the vote. He called Powell's handling of the issue "grossly violative" of the spirit of the agency process.

The three Republicans vigorously defended the process. Powell said it had been more open than at any time in FCC history. In the end, he said, the issue boiled down to an irreconcilable clash of views over what the court meant and how the FCC should address its concerns.

"On the most difficult and controversial issues, it usually splits," Powell said.

Override unlikely

Just like the FCC is split, so is the Congress. While a majority of committee members loudly supported an effort to reverse the new rules, the House of Representatives and the White House are unlikely to go along.

Key players on communications issues, such as Reps. Billy Tauzin, R-La., and Fred Upton, R-Mich., credited the FCC with making "tough decisions" that they said were long overdue.

Tauzin's spokesman, Ken Johnson, told CBS.MarketWatch.com on Tuesday that the congressman would allow a hearing on the FCC decision, but he emphatically ruled out a vote on whether to overturn it.

"There is no way Billy is going to allow anyone to do an end-run around the FCC," Johnson said. Tauzin heads the House Commerce Committee, which has jurisdiction over the matter.

President Bush, for his part, would almost certainly veto the bill, analysts say. He nominated all three Republicans now serving on the FCC commission.

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